Unlocking shareholder value at Spectra Energy

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Sandell GroupUnlocking Shareholder Value at

Spectra Energy Corp (SE)


THIS PRESENTATION WITH RESPECT TO SPECTRA ENERGY CORP (“SE” OR THE “COMPANY”) IS FOR GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION, SUITABILITY OR PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. THE VIEWS EXPRESSED HEREIN REPRESENT THE OPINIONS OF SANDELL ASSET MANAGEMENT CORP. (“SAMC”), AND ARE BASED ON PUBLICLY AVAILABLE INFORMATION AND SAMC ANALYSES. CERTAIN FINANCIAL INFORMATION AND DATA USED HEREIN HAVE BEEN DERIVED OR OBTAINED FROM FILINGS MADE WITH THE SEC BY THE COMPANY OR OTHER COMPANIES CONSIDERED COMPARABLE, AND FROM OTHER THIRD PARTY REPORTS.

SAMC HAS NOT SOUGHT OR OBTAINED CONSENT FROM ANY THIRD PARTY TO USE ANY STATEMENTS OR INFORMATION INDICATED HEREIN. ANY SUCH STATEMENTS OR INFORMATION SHOULD NOT BE VIEWED AS INDICATING THE SUPPORT OF SUCH THIRD PARTY FOR THE VIEWS EXPRESSED HEREIN. NO REPRESENTATION OR WARRANTY IS MADE THAT DATA OR INFORMATION, WHETHER DERIVED OR OBTAINED FROM FILINGS MADE WITH THE SEC OR FROM ANY THIRD PARTY, ARE ACCURATE.

SAMC SHALL NOT BE RESPONSIBLE OR HAVE ANY LIABILITY FOR ANY MISINFORMATION CONTAINED IN ANY SEC FILING OR THIRD PARTY REPORT. THERE IS NO ASSURANCE OR GUARANTEE WITH RESPECT TO THE PRICES AT WHICH ANY SECURITIES OF THE COMPANY WILL TRADE, AND SUCH SECURITIES MAY NOT TRADE AT PRICES THAT MAY BE IMPLIED HEREIN. THE ESTIMATES, PROJECTIONS, PRO FORMA INFORMATION AND POTENTIAL IMPACT OF SAMC’S ACTION PLAN SET FORTH HEREIN ARE BASED ON ASSUMPTIONS THAT SAMC BELIEVES TO BE REASONABLE, BUT THERE CAN BE NO ASSURANCE OR GUARANTEE THAT ACTUAL RESULTS OR PERFORMANCE OF THE COMPANY WILL NOT DIFFER, AND SUCH DIFFERENCES MAY BE MATERIAL. THIS PRESENTATION DOES NOT RECOMMEND THE PURCHASE OR SALE OF ANY SECURITY. SAMC RESERVES THE RIGHT TO CHANGE ANY OF ITS OPINIONS EXPRESSED HEREIN AT ANY TIME AS IT DEEMS APPROPRIATE. SAMC DISCLAIMS ANY OBLIGATION TO UPDATE THE INFORMATION CONTAINED HEREIN.

UNDER NO CIRCUMSTANCES IS THIS PRESENTATION TO BE USED OR CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY. PRIVATE INVESTMENT FUNDS ADVISED BY SAMC CURRENTLY HOLD SHARES OF THE COMPANY’S COMMON STOCK. SAMC MANAGES INVESTMENT FUNDS THAT ARE IN THE BUSINESS OF TRADING – BUYING AND SELLING – PUBLIC SECURITIES. IT IS POSSIBLE THAT THEREWILL BE DEVELOPMENTS IN THE FUTURE THAT CAUSE SAMC AND/OR ONE OR MORE OF THE INVESTMENT FUNDS IT MANAGES, FROM TIME TO TIME (IN OPEN MARKET OR PRIVATELY NEGOTIATED TRANSACTIONS OR OTHERWISE), TO SELL ALL OR A PORTION OF THEIR SHARES (INCLUDING VIA SHORT SALES), BUY ADDITIONAL SHARES OR TRADE IN OPTIONS, PUTS, CALLS OR OTHER DERIVATIVE INSTRUMENTS RELATING TO SUCH SHARES. SAMC AND SUCH INVESTMENT FUNDS ALSO RESERVE THE RIGHT TO TAKE ANY ACTIONS WITH RESPECT TO THEIR INVESTMENTS IN THE COMPANY AS THEY MAY DEEM APPROPRIATE, INCLUDING, BUT NOT LIMITED TO, COMMUNICATING WITH MANAGEMENT OF THE COMPANY, THE BOARD OF DIRECTORS OF THE COMPANY AND OTHER INVESTORS AND THIRD PARTIES, AND CONDUCTING A PROXY SOLICITATION WITH RESPECT TO THE ELECTION OF PERSONS TO THE BOARD OF DIRECTORS OF THE COMPANY.


Goal: Transform Spectra Energy Corp (SE) from ‘Utility’ to Energy Infrastructure Player— SE is one of the largest North American energy infrastructure companies with $25bn+ of prospective investment projects, operated

and perceived as a utility company— SE has underperformed peers by 70%+, trading at a meaningful discount due to its tax-inefficient, conglomerate structure, unnecessarily elevating its cost

of capital versus an industry on the cusp of explosive organic growth

— There are clear steps to unlocking and maximizing shareholder value through strategic/financial actions already undertaken by industry peers; in our analysis, the current FinCo + OpCo financing structure at SE does not prevent any of these steps

We estimate that an appropriate valuation for SE would be $41 to $48 per share (+32% to +55% upside) if it were to take the following steps

— Step 1: Drop-down SE’s US Transmission (UST) assets into Spectra Energy Partners, LP (SEP), an MLP— Dropping UST into SEP would lower its overall cost of capital and be 20%+ accretive to both SE’s dividend and SEP’s distribution, vaulting SEP to the

highest class of large MLPs (e.g., WPZ and KMP) that are widely followed and trade at premium multiples / yields to other MLPs

— Through this step, SE would clearly target the separate MLP & ‘GP HoldCo’ shareholder bases, reducing the current conglomerate discount. Furthermore, SE’s slate of organic growth projects would provide consistent growth for both SE/SEP’s dividend/distribution

— As shown by industry peers, the long term benefits of a lower cost of capital and the fast growing incentive distribution right (IDR) cash flow will directly accrue to the pro forma SE ‘GP HoldCo’ shareholders over time

— Step 2: IPO/Sell SE’s Canadian operations, a fully-owned subsidiary operating as Westcoast Energy Inc. (WE)— By IPO’ing WE in Canada, SE can access the lower cost of capital afforded to Canadian infrastructure assets that trade at premiums given global interest in

Canadian energy resources (oil sands, shale, LNG, NGLs), competitively low corporate tax rates (15%-20%) and yield-driven investors

— We believe that an IPO of Westcoast would be oversubscribed as Canadian pension funds, mutual funds and traditional energy infrastructure investors would be attracted to its asset base, upside potential and significant market cap (~$10bn)

— Comparable Canadian companies trade at 13x to 14x 2013 EBITDA vs. SE trading at less than 11x 2013 EBITDA

— Step 3: IPO/Sell SE’s 50% stake in DCP Midstream LLC (DCP) to highlight DCP’s MLP-qualifying income— In its current structure (where DCP is owned by tax-paying C-corps), its potential MLP-type valuation is obscured; an IPO of DCP would remove this veil

— DCP’s assets would be a natural target for other MLPs (including DPM or SEP), a transaction that would highlight the strategic value of DCP

These steps will 1) better align shareholder bases to assets, reducing SE’s conglomerate discount thereby lowering cost of capital and 2) tie management incentives more directly to operational performance of assets and strategy

Unlocking Shareholder Value at Spectra Energy Corp


Spectra Energy (SE): Transformation from ‘Utility’ to Energy Infrastructure Player

DCP

Field Services

50% of DCP, largest US NGL producer and nat gas processor (with EPD & WMB); PSX is co-owner

40% POP, 10% KW contracts exposed to natural gas & NGL prices

IPO/Sell to garner premium multiple afforded to tax-efficient MLP which is lost in current structure with SE & PSX as tax-payers or

Merge with DPM/SEP or another large MLP

Distribution Western Canada

Regulated, retail natural gas distribution in Ontario

2nd largest distributor in Canada; Dawn Storage is largest underground storage facility in North America

Canadian pipeline & midstream operations in BC/Alberta located in most productive shale gas fields; LNG upside

Empress NGL system exposed to NGL prices

Westcoast Energy

IPO/Sell to garner premium multiple afforded to Canadian infrastructure assets due to global interest in Canadian energy, lower tax rates and yield-driven investors

UST / Liquids

Gulf coast to Northeast US Pipeline Infrastructure

Owns 61% of SEP (MLP)

Long term, take or pay, fee based reservation revenue (95%)

SEP (MLP)

Drop-down all assets into SEP, pushing significant future capex to lowest cost of capital entity

Increased market cap and growth trajectory will yield premium multiple

M&NLP (Canadian Portion)



§ SE’s Sum of the Parts (SOTP) Valuation Range is $41 to $48/share (+32% to +55% upside)

§ SE drop-down has successful case study

— Williams Companies (WMB) dropped down its pipeline assets to Williams Partners (WPZ) in January 2010 with WMB owning 80% of WPZ; currently at 67% ownership

— Given subsidiary financing structure at SE, no new debt will need to be raised and no cash to be transferred (avoiding capital gains treatment)

§ WE IPO is efficient and easy to pursue

— WE was acquired in 2002 by Duke Energy (DUK)

— SE was spun out of DUK in 2006 with WE as a subsidiary

— WE’s debt (under Westcoast Energy Inc. and Union Gas Limited) is already at the subsidiary level

§ DCP to be IPO’ed or sold

— Crystallizes value for investors – specifically DCP’s tax advantaged structure which is lost as DCP pays SE significant tax distributions

— Motivates DCP management to operate more efficiently, grow more aggressively and better manage transition from commodity-exposed contracts to fee-based contracts

Unlocking Shareholder Value at Spectra Energy CorpSpectra Energy Corp. SOTP Valuation* Base $ / % High $ / %

Case Upl i ft C ase U pl i ft

Spectra Energy Partners, LP (SEP) LP Div / Share (1) $2.48 $2.48(Full drop down of US Transmission Yield (2) 5.4% 4.9% assets from SE, SEP assumes SEP Price $45.72 $50.35 TET, SEC + Comml Paper, SE shares owned (3) 187 187 Other debt less $500m WE note) Value of LP shares 8,565 9,433

IDR payment 169 169 GP Yield (4) 3.7% 3.7%Value of IDR 4,561 4,561

Equity value to SE 13,1 26 13,994 per share $2 0.00 $5/50% $21 .00 $6/40%

Westcoast Energy Inc. (WE) EBITDA (5) 1,195 1,195 (100% Canadian business; Multiple (6) 12.6x 14.2x Distribution and Western Canada Enterprise value 15,066 16,924 segments + M&NLP) Debt (7) 6,171 6,171

Equity value to SE 8,8 95 10,753 per share $1 4.00 $4/40% $16 .00 $6/40%

DC P Midstream LLC (DCP) EBITDA (8) 580 710 (100% Field Services business, less: interest & D+A (9) (270) (270) comprising 50% ownership Distributable cash flow 310 440 of DCP) Coverage ratio 1.10 1.10

Dividend 282 400 Yield (10) 6.1% 5.6%

Equity value to SE 4,5 88 7,186 per share $ 7.00 $1/10% $11 .00 $5/20%

$41.00 $48.00% upside from current 32 % 55%

(1) Assumes dropdown of SE US Transmission assets, current IDR waterfall structure(2) Base: SEP yield; High: assumes SEP current yield less 50bps for size premium(3) Total PF LP shares out of 224m, SE owns 82% of the LP + 4m GP shares(4) C-corp owned GP IDRs: Base & High: WM B div yield(5) Distribut ion + Western Canada 2013 EBITDA est imates from SE, not considering M &NLP (incl in US Transmission)(6) Base Case using 2013 TRP trading multiples; High Case using avg of TRP + ENB + KEY multiples(7) Westcoast + Union Gas subsidiary debt + $500m SE debt + $459m pfds + CP less: M &NLP debt (cash collateralized)(8) Base: Field Services EBITDA estimate for 2013 (NGL/bbl of 80c); High: assumes higher NGL and Nat Gas prices(9) 2013 est imates f rom SE(10) Base case: avg div yield of comps & High Case: DPM Yield* - excl Express-Plat te, Sand Hills & Southern Hills, $85m/yr of corp costs + pens underfunding of $430m in US/Can, s/o of 658m, Dec 2012 debt f igures

NAV / Share $41.00 $48.00% upside from current 32 % 55%

NAV / Share% upside from current


§ SE stock returns have been poor compared to comparable energy infrastructure companies with similar growth profiles

— Stock underperformance acute over past several years as industry peers have engaged in several value-enhancing strategic actions, acquisitions, splits and spin-offs driven by low interest rate environment, strong credit conditions, desire to be tax-efficient and the targeting of specific investor criteria

Over the past year, SE has traded down 5% versus comps which were up 21% - a 26% underperformanceOver a 3 year period, SE’s underperformance has been much more dramatic – 72% below comps

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US Comparable Companies (OKE, WMB, KMI, ETE, EPD, SUG & EP) SE

WMB/WPZ restructuring

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KMI acquires EP

OKE stock split

ETE acquires SUG

EPD acquires EPE

EPD acquires DEP

ETP acquires SUNKMI acquires CPNO


C omps SE Diff1 YR 21% -5% -26%2 YR 57% 12% -46%3 YR 10 6% 34% -72%

Absolute Price Performance


Step 1: Drop down SE’s US Transmission assets to Spectra Energy Partners, LP (SEP), an MLP§ Dropping US Transmission assets into SEP yields SE value of $20-$21/share

— Drop down of SE US Transmission assets into SEP would allow SE to benefit from SEP’s lower cost of capital; SEP would also be able to fund capex and growth directly with debt and public equity raises, while leaving SE as a ‘GP HoldCo’, a nimble, highly-strategic entity reserved for overall capital allocation decisions

— After the completion of the drop-down, SEP would become one of the largest MLPs (comparable to WPZ and KMP), thus benefiting from a premium valuation and a well-defined organic growth trajectory - over time, SEP’s liquidity would increase through new equity issuances, reducing SE’s 82% ownership

§ We believe this transaction would be significantly accretive to SEP and simultaneously increase SEP’s IDR payout by almost 6x

— SEP’s distribution would increase from $1.98/share to $2.48/share (25%+), based on elimination of cash taxes paid on SE’s UST assets

— Assuming current IDR structure, the IDR cash flow to SE shareholders would increase from an estimated $29m annually to approximately $169m annually – given SEP’s organic growth prospects, this IDR payment should increase exponentially as SEP continues to grow with initial accretion to SE’s dividend of 20%+

— This transaction leaves SEP conservatively capitalized and given SE’s subsidiary level financing for most of its debt (i.e., current debt will travel with assets) and SEP stock consideration, eliminates any capital gains tax

— We estimate this process will take 2-3 months with SEP assuming all subsidiary level debt and tendering for SE’s FinCo unsecured debt


Metric SEP PF SEP C hange Base High Adjusted EBITDA 305 1,397 Appropriate dividend yield (2) 5.4% 4.9%EBIT 109 945 Implied share price for SEP $45.72 $50.35Distributable Cash Flow 239 775 Units owned by SE 187 187 Annual dividend to LPs $1.98 $2.48 25% Value to SE shareholders: SEP 8,565 9,433 IDR Cash Flow for SE (1) 29 169 5.8xSE ownership of SEP 61% 82% IDR cash flow 169 169 EV / EBITDA 16.3x 12.6x IDR dividend yield (3) 3.7% 3.7%Debt / EBITDA 3.5x 5.2x Value to SE shareholders: IDR 4,561 4,561 (1) Assume no change in IDR structure(2) Base: SEP current dividend; High: SEP yield less 50bps Total value to SE shareholders 13,126 13 ,994 (3) Base/High: WMB div yield per share $20.00 $21.00

Key Valuation Metrics Valuation for SE


§ Williams Companies (WMB) dropped down all of its midstream and pipeline assets into Williams Partners (WPZ) in January 2010

— The $12bn in asset drop downs increased WPZ’s EV 5x+ from approximately $2.6bn to $14.2bn, increasing its capacity for growth and reducing its cost of capital

— The transaction was financed through WPZ stock (50%, taking WMB ownership to 80% from 24%), new debt (25%) and assumed debt at the asset level (25%), minimizing any capital gains tax consequences for WMB and was completed in under 1 month (announced January 19th, closed February 17th)

— Transaction successfully targeted MLP and ‘GP HoldCo’ shareholder bases and unlocked significant value for WMB shareholders

WMB has considerably outperformed SE in the relevant time frame with sell-side valuing WMB’s GP IDR at 25x+ Cash Flow

Step 1: WPZ/WMB transaction provides a successful case study

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WMB WPZ SE SEP

WMB/WPZ restructuring


WM B SE Diff1 YR 19% -5% -25%2 YR 46% 12% -34%3 YR 99% 34% -65%

Absolute Price Performance


Step 2: IPO/Sell Westcoast Energy Inc. (WE)§ The IPO of WE will highlight its $14 to $16/share value based on trading multiples for comparable Canadian infrastructure companies

— WE was purchased in 2002 by Duke Energy (DUK), former parent of SE, for $8.5bn and was primarily comprised of Canadian natural gas pipeline, storage, processing and retail distribution (Union Gas) business

— DUK enhanced the WE acquisition in 2005 through an asset swap with ConocoPhillips (COP), whereby DUK swapped 19.7% of DCP (giving COP an equal 50% stake in DCP) for the Empress NGL system in Canada (among other asset exchanges); DUK spun out SE in 2006 with WE as a fully-owned subsidiary

— Canadian infrastructure companies currently trade at a premium due to global interest in Canadian energy (shale, oil sands, LNG export, NGLs), competitively low corporate tax rates (15%-20%) and large, yield-driven institutional investors

— IPO will result a re-rating of the valuation of WE as Canadian investors highly value consistency and dividends; proceeds can be used to pay-off interco loans or preferreds

§ Since debt is at the subsidiary level and the subsidiary publicly files financials, an IPO of WE should be quick and efficient

— We estimate this process will take 3-6 months

— With a management team in place to operate assets and a compensation scheme more closely tied to WE stock performance, WE should operationally outperform, providing upside for shareholders; WE currently reimburses SE for all centralized corporate functions and files with SEDAR i.e., we expect no significant dis-synergies

— Given size / scale of WE (and its ability to raise debt and equity capital directly from investors), WE should be able to finance growth projects in the Horn River, Montney and North Montney, as well as other long term LNG projects (e.g., Prince Rupert with BG Group) at a cheaper cost of capital


Ticker Name Mkt cap EV Rating EV/EBITDA P/E Div yieldENB ENBRIDGE INC 39,261 68,644 A- 16.2x 22.8x 2.6%TRP TRANSCANADA CORP 34,951 60,177 A- 12.6x 19.7x 3.7%KEY KEYERA CORP 4,863 5,681 N/A 13.7x 26.3x 3.5%Average 14.2x 22.9x

per share Mkt cap EV Rating EV/EBITDA P/E Div yieldBase case: TRP EBITDA x $14.00 8,895 15,066 BBB+ 12.6x 26.9x 3.4%High case: Avg EBITDA x $16.00 10,753 16,924 BBB+ 14.2x 32.5x 2.8%Assumes 2013 guidance from SE for Distribution + Western Canada, 20% tax rate, 1.1x coverage ratioM &NLP debt not included in analysis given cash collateralization o f debt

Westcoast Energy Inc. Valuation

Large C ap C anadian Infrastructure Comparables


Step 3: IPO/Sell DCP Midstream LLC (DCP)§ IPO/Sale of DCP Midstream yields $7/share, plus an additional $4/share from normalization of natural gas and NGL prices

— Highlights tax-efficient nature of DCP and its value to public shareholders or other potential tax-efficient acquirers; current structure hides DCP’s cash tax distribution payments made, approximately 50% of which goes to SE to pay taxes on DCP’s pass-thru income (remaining goes to co-owner, PSX)

— IPO’ing DCP would allow a) the market to value those tax distributions as part of DCP and/or b) an MLP acquirer to value those tax-efficient cash flows

— As a separate entity, DCP management could engage in value-enhancing strategies either through operational actions (e.g., hedge NGL prices, grow more aggressively) or strategic actions (e.g., partnering with adjacent operators to maximize value)

— We estimate this process will take 3-6 months, as DCP is currently audited and files financials with the SEC and will require negotiations/discussions with co-owner PSX

§ Over the last decade, DCP has been forced to dividend cash generated to its JV owners allowing competitors to gain market share and competitive advantage in its basins, as shale discoveries have revolutionized the gathering and processing business

— DCP has dividended more than its net income to cover JV owners’ operating/growth cash needs and tax payments – in some years dividending 125%-130% of its net income (note: given that DCP is an LLC, it does not pay taxes and therefore its net income is EBT)

— Going forward, DCP should be encouraged to invest cash generated as opposed to distributing it to take advantage of the many growth opportunities


2013 DivN ame Mkt Cap EV Ratings EBDA x Yield

Base High MARKWEST ENERGY 10,005 13,081 BB 13.4x 4.9%Case Case TARGA RESOURCES 5,047 7,551 BB 12.0x 5.7%

EBITDA (1) 580 710 COPANO ENERGY-UN 3,323 4,555 B+ 13.6x 5.7%Interest expense & D&A (2) (270) (270) ATLAS PIPELINE P 3,001 4,379 B+ 9.7x 6.0%Distributable cash flow 310 440 CROSSTEX ENERGY 1,614 2,757 B+ 8.8x 6.5%Coverage ratio 1.10 1.10 PVR PARTNERS LP 3,328 4,915 B+ 11.6x 8.5%Dividend 282 400 DCP MIDSTREAM PA 3,863 5,767 BBB- 11.6x 5.6%DPM dividend yield 6.1% 5.6% Averages 11.5x 6.1%Total value to SE shareholders 4,588 7 ,186 per share $7.00 $11.00 DCP - Spectra Base 9,176 14,976 BBB 12.9x 6.1%

DCP - Spectra High 14,371 20,171 BBB 14.2x 5.6%(1) Base case uses 2013 guidance, High case assumes higher NGL and Nat Gas prices(2) SE estimates

Valuat ion fo r SE's 50% ownership of DCP NGL Midstream Comparables / Valuation


None of management comments on MLP opportunities are correct§ Management comment #1: Assets with a low tax basis may not be efficient for MLP drop down

— If SE takes partnership units in exchange of cash or employs a LevPar structure (below), there is no tax impact to MLP drop down

— The tax impact on an asset sale from a ‘GP HoldCo’ to an MLP can be minimized by utilizing the leveraged partnership (LevPar) structure. This structure enables the C-corpto avoid upfront tax payments so long as it guarantees the debt issued by the MLP in conjunction with the asset acquisition and as part of the consideration, accepting some amount of LP equity issued by the MLP; a LevPar structure was employed in Energy Transfer’s acquisition of Southern Union

— Additionally, in SE’s case, since the majority of the debt is funded at the subsidiary level, most of the financing of the asset can travel with the assets

§ Management comment #2: MLP value incrementally unclear given commodity exposure and significant Canadian presence

— Management had made these comments in Q1-12 when questioned about whether they would be at a competitive disadvantage if they did not utilize the MLP structure. Implementing Step 2 and Step 3 removes this concern as these steps will isolate the inherent value of SEP and the asset drop down strategy (Step 1)

— Step 1 of our value maximization plan would clearly target MLP and ‘GP HoldCo’ shareholders, lowering cost of capital

— Step 2 of our value maximization plan includes IPO’ing Westcoast Energy, which would include all of SE’s Canadian businesses

— Step 3 of our value maximization plan states that SE should IPO/Sell DCP as it would highlight its MLP-qualifying income

§ Management comment #3: Path towards U.S. tax reform remains unclear

— While this has been an understandable concern given the lack of clarity on a fiscal cliff resolution in the past year, lawmakers ultimately reached an agreement and enacted legislation, which did not include any tax reform impacting MLPs

— Given that US lawmakers have proposed several recent initiatives to expand the MLP structure to help lower the cost of capital for alternative energy projects, we believe there is very little significant risk to the MLP structure




Management compensation has limited alignment to shareholder returns

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SE, Ebel

EPD, Creel

OKE, Gibson

WMB, Armstrong

KMI, Kinder

ETE, Warren

TRP, Girling

KEY, Bertram

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2012 compensation summary (US$m)

CEOs paid LESS with better shareholder

returns

SE CEO paid MORE despite 70% share underperformance

Despite the underperformance of SE shares, CEO compensation ranks as one of the highest among comparable company CEOs

§ Surprisingly, in 2012, after missing expectations and stock underperformance, SE CEO’s compensation increased from 2011

— Other than John Gibson at Oneok, Greg Ebel out-earned all other CEOs for 2012 and for the 3 years ending 2012

— SE also has duplicative management teams at each of its subsidiary operations (SEP, WE and DCP) with a CEO at its MLP (note: no other comparable company has a separate CEO for their ‘GP HoldCo’ and MLP entity) and full executive teams at WE and DCP

— Lastly, SE routinely compares itself from a performance standpoint to regulated US utilities (e.g., PEG, ED, PCG, XEL) – we do not believe these are the right comps for SE and neither do any of the other energy infrastructure companies listed below


§ Insiders only own less than 1% of SE US shares

— Directors + management own 1.3m shares out of 658m shares o/s

— Management alone own ~0.8m shares

— In addition, directors + management own ~29k units of SEP US

§ Management compensation is a mixture of both short and long-term remuneration

— Total compensation: ~1/3 base salary (19% for CEO); ~20% short-term incentives; remainder as long-term incentives (split between time-based and performance-based)

— Short-term incentive pay is based on a mixture of measures (incl. EPS, EBIT and ROCE)

— Long-term incentive program consists of performance share unit awards that vest on achievement of performance goals in combination with phantom units that vest over a 3-year period

— Over the past 3 years (2010-12), CEO Gregory L. Ebel has received compensation of ~$22.9m; the other named executives have received a combined $26.6m

Management Compensation

Name Title

2010 2011 2012 2010-12

Gregory L. Ebel President and CEO 6,864,886 7,782,334 8,225,957 22,873,177

J. Patrick Reddy CFO 2,482,225 2,513,081 2,391,525 7,386,831

Alan N. Harris Chief Development and Operations Officer 2,540,124 2,547,879 2,361,008 7,449,011

Reginald D. Hedgebeth General Counsel 2,202,875 2,171,154 2,216,586 6,590,615

Dorothy M. Ables Chief Administrative Officer 1,753,904 1,767,974 1,691,852 5,213,730


Management compensation has limited alignment to shareholder returns

Top executives paid almost $50m over past 3 years despite 70%+ underperformance of SE share price versus comparables

Unlocking shareholder value at Spectra Energy

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